Wholesale gas taxes called 'a shell game'

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Local,Maryland,Andy Brownfield

Sales taxes on gasoline -- like the ones proposed by the governors of Maryland and Virginia to fund transportation projects in each state -- aren't paid directly by consumers like they would be in the sale of other goods, and some claim that's a political ploy to make them more palatable to voters.

A plan proposed by Maryland Gov. Martin O'Malley would levy a 2 percent sales tax on gas starting in July, but that would be at the wholesale level, before the gas even gets to the local Exxon or BP. O'Malley's office says that's because there's an 18.4-cents-per-gallon federal tax on wholesale gasoline, so if the state taxes gas at the retail level, it would be taxing a tax.

Retailers pass the cost of the wholesale tax on to consumers, but it's up to each retailer to decide how much to up the price.

"It's a shell game," said John Townsend, manager with AAA Mid-Atlantic, an advocacy group for drivers. "The idea is that consumers are so stupid that they won't be able to tell there's been a tax increase. But they're not stupid. But if that's what it takes to pass a bill, that's the nature of politics in both states."

O'Malley's plan includes cutting the current 23.5-cents-per-gallon gas tax by 5 cents to 18.5 cents per gallon and indexing that to inflation. It would also index Maryland Transit Authority bus and rail fares to inflation.

The 2 percent wholesale tax would raise gas prices by an estimated 2 cents per gallon. That's expected to go up another 7 cents in July 2014, when the wholesale tax increases to 4 percent.

The goal is to raise cash for the state's Transportation Trust Fund, which can't currently fund new projects like the proposed Purple light rail line. Without additional cash, officials say the fund will be broke in 2018. O'Malley's plan would raise $3.4 billion by that time.

Taxing gasoline at the wholesale level has been favored by politicians for two reasons, said Jonathan Gifford, director of the Transportation Policy, Operations and Logistics program at George Mason University.

"One, it's a little less visible. It's not transparent -- you're not getting a receipt saying, 'You paid this much in gas tax,' " Gifford said.

"Second reason is because it gets pegged to inflation, so as gas prices go up, revenues go up."

abrownfield@washingtonexaminer.com

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